After A Year Of Pandemic, The Transportation Sector Gets Moving

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Transportation was among the most heavily impacted sectors through the depths of the pandemic, knee-capping global shipping, placing additional strain on delivery services and stopping virtually all commercial air travel.

For roughly a year, these industries have been forced to quickly adapt to these rapidly changing circumstances. Those 12 months have allowed many of these firms time to adjust to the new circumstances, and it’s worth looking at how are these industries are faring as the world cautiously emerges from its lockdown state.

Even outside of a pandemic, the picture for the transportation sector tends to be murky, with analysts relying on predictive algorithms using information garnered from hundreds of different sources. An upcoming free demonstration from trading research platform VantagePoint hopes to illustrate how the platform’s own institutional-grade A.I. can track the impact of the pandemic on individual stocks within the sector, helping improve trading accuracy as much as 87% across all sectors of the market.

However, of all the sectors that could benefit from a clearer understanding of which stocks are set to outperform in the coming months, transportation is among the most prominent, and most fraught.

Dry Shipping

Case in point, dry shipping has emerged as the poster child for pandemic-related disruption. While the immediate problem of containing a contagious virus without completely decimating the global supply chain economy was troubling enough, the industry is now seeing the opposite “problem” of huge demand for imported goods, particularly from China to the U.S, which has caused unprecedented congestions in many of America’s busiest ports.

The heightened demand for consumer goods has substantially boosted the margins for container shippers, which have largely put up strong revenue numbers through the final half of 2020. This has translated to huge gains in a variety of dry bulk names, with large firms like Matson, Inc. MATX climbing 100% over the past year while smaller outfits like Navios Maritime Containers L.P. NMCI and Danaos Corporation DAC have surged by 1,000% or more.

However, it’s important to note that these trends are liable to shift as the world continues to adapt to the new physics of the emerging post-pandemic environment.

Airliners

One segment of the transportation industry whose fortune is less clearly defined by its current demand ar airliners, which, over the past year, have struggled to stay viable through air cargo and other ancillary services as their revenue from travel effectively ceased.

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However, with the increased distribution of vaccines and the recent surge in spring travel, airliners have seen some renewed interest from Wall Street. Major carriers United Airlines Holdings, Inc. UAL, American Airlines Group Inc. AAL and Southwest Airlines Co. LUV have gained 40% to 50% through February, though they’ve lost some of that momentum through March as COVID cases have again increased, potentially a result of increased travel.

Given the uptick in new cases, as well as the continued global uncertainty around containing the ongoing pandemic, airline stocks will likely remain extremely vulnerable in spite of the recent enthusiasm.

Ground Transportation

Finally, stocks in the surface road and rail transportation segments have perhaps seen the most muted reaction to start the new year, although it follows a steep climb many of them experienced at the tail end of 2020.

This is most notable in delivery concerns FedEx Corporation FDX and United Parcel Service, Inc. UPS, which each surged more than 60% through the back half of last year. Both have been essentially flat in 2021 despite posting top- and bottom-line earnings beats in their most recent reports.

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A similar picture has also played out among rail companies like Union Pacific Corporation UNP and CSX Corporation CSX, which have met or exceeded earnings expectations but have failed to translate that into share price growth.

However, there are some significant exceptions to this trend, and they may signal the potential for future growth in the transportation sector overall. Trucking firms, for one, have emerged as a standout in the sector in 2021’s first quarter, with Old Dominion Freight Line, Inc. ODFL and Saia, Inc. SAIA up around 20% year-to-date on a steady rise.
Although interrupted as a result of the pandemic, the steady flow of goods and people throughout the country and the world has already pumped new life into the transportation sector. While its fate over the next few months may still be tied to the ongoing pandemic, traders can look to predictive research tools like those on VantagePoint for an indication of where the market may be headed next.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.